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# Accounting: Break-even quantity and capital strucuturing.

16.1 Shapland Inc. has fixed operating costs of \$500,000 and variable costs of \$50 per unit. If it sells the product for \$75 per unit, what is the break-even quantity?

16.2 Counts Accounting has a beta of 1.15. The tax rate is 40% and Counts is financed with 20% debt. What is Counts's unlevered beta?

16.3 Ethier Enterprise has an unlevered beta of 1.0. Ethier is financed with 50% debt and has a levered beta of 1.6. If the risk-free rate is 5.5% and the market risk premium is 6%, how much is the additional premium that Ethier's shareholders require to be compensated for financial risk?

16.4 Nichols Corporation's value of operations is equal to \$500 million after a recapitalization (the firm had no debt before the recap). It raised \$200 million in new debt and used this to buy back stock. Nichols had no short-term investments
before or after the recap. After the recap, wd _ 0.4. What is S (the value of equity after the recap)?

#### Solution Summary

The problem deals with estimating the break-even point and evaluating different capital structures.

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